Dimensions of the current systemic crisis: Capitalism in short circuit?

Abstract

The crisis of global financial-led growth reflects evidence of exhaustion of the current model of accumulation, which has been in place since the late 1970s, characterized by lower growth rates and decreasing labour shares. A system which so far has only been possible by means of excessive consumerism through increasing indebtedness, accelerated depletion of resources, growing income inequalities and social exclusion and unrest. Yet this is no longer sustainable. Since the end of the last century, we can find and connect root signs of a multidimensional systemic crisis, which manifests itself today beyond the economic downturn in terms of human, ecological and socio-political crises. The contradictions that arise from the process of capital accumulation are the point of departure to look at this multidimensional crisis.

Keywords

crisis capitalism inequality human development sustainability

I Introduction

We live today in a situation without precedent in the history of humanity. Never before has there been so many of us (the Earth now exceeds 7 billion inhabitants) and never before have we produced and consumed so much (world average GDP per capita having steadily increased until 2008). Moreover, we enjoy the most advanced technology and are more interconnected than ever before. But we are also currently experiencing one of the major crises of modern times. The current economic and financial crisis has reduced production and trade, destroyed millions of jobs worldwide, increased disparities both internal as well as international, exacerbated conflicts and violence, and intensified the exploitation of natural resources. But the current crisis goes beyond economic downturn. In this paper, we argue that we are experiencing a systemic crisis of multiple dimensions, namely an economic, human, ecological and socio-political one, reflected in global challenges of unprecedented intensity, magnitude and scope, and rooted in the very dynamics of the capitalist economic system, which has now clearly become unsustainable.

We analyze several global ‘crises’ from a broad, integral and systemic perspective. Our goal is to show to what extent these crises are interconnected and can be considered as different dimensions of a systemic crisis. We first analyze the main dynamics behind the process of capital accumulation and economic growth in order to reveal how the inner contradictions—social and natural—that drive the process of surplus generation lead to recurrent crisis in capitalist economies. We then look at several indicators to track the parallel evolution of the different disruptions considered and to analyze potential interconnections between them. We analyze different dimensions of the systemic crisis by working with political, ecological and socio-economic indicators from a general perspective, rather than independently as has usually been the case before. The aim of this article is to advance the search for theoretical and empirical connections of all these overlapping crises. Our analysis suggests how recent dynamics indeed reflect deeper interconnected systemic disruptions, reinforcing each other and representing dimensions of a major systemic crisis of capitalism as the driving force of current socio-economic, environmental and socio-political dysfunctions. Increasing inequalities seem to not just play a major role in the evolution of the current economic crisis, but are also behind the evolution of the other systemic dysfunctions and their interconnectivity. Finally, we discuss the manifested impossibility of capitalism to cover human needs worldwide, not only in terms of material well-being but also in terms of subjective satisfaction.

This paper is organized as follows: Section II theoretically frames the existence of a systemic crisis of a multidimensional nature. Section III focuses on describing the different dimensions of this systemic crisis, tracing back key indicators for each dimension. Section IV analyzes interconnections between those dimensions and common root systemic causes. Section V concludes the paper and discusses policy implications of our analysis.

II Systemic crisis beyond economic crisis

If most social scientists were asked about the political and socio-economic problems that feature in our societies today the answer would probably be, at least intuitively, that it seems plausible to consider that those pertaining to system defaults are interconnected. The problem that arises is that the dominant economic paradigm, with Economics ruling over other social disciplines (Fine, 2002), focused on extreme mathematical formalization and was characterized by an ahistorical perspective and an individualistic methodology, making it difficult to explore the causes and impacts of the present multidimensional crisis. Not considering Economics as a monolithic body can be helpful in this sense (Sardoni, 2009).

Consequently, it may be worth overcoming the well-known conceptual constraints of the dominant paradigm in order to reclaim a historical, social and interdisciplinary approach that the complexity of the phenomena currently emerging in our societies requires. We need to overcome the narrow framework of orthodox (neo-classical) economics in order to explore in more depth some plausible explanation for what is happening today. Hence, we advocate to conceptually advance towards a broader comprehension of the social realm by regaining the ability to connect different dimensions of the real world.¹ This implies conceiving of our economic capitalist system as a mechanism that while fulfilling what should be its main objective (the reproduction of society in the material domain) also develops its own dynamics in terms of specific production and distribution relationships (Gill, 2002). While capitalism is associated with technological innovation, progress, competition and efficiency as engines of growth, it is also responsible for phenomena such as overproduction, cycles, crises of profitability, exploitation of labour, overexploitation of natural resources and mercantilization of life, in both personal and collective confines—such as child care, leisure or the environment, among others.² This ‘invasive’ character of capitalism over social life has been thoroughly described by Harvey (2010), who points out that there are ‘seven activity spheres’, which capital needs to conquer in order to accumulate.³

At the present stage of capitalism’s global phase, it is fundamental to explore how the system develops in the globalized economy, the dynamics of which are featured mainly by cyclical crisis and unequal development (Caputo et al., 2001). In this sense, the present crisis clearly shows that beyond its economic manifestation in terms of product downfall, investment and employment, we can talk about a structural crisis in the sense that it confirms the breakdown of the accumulation process dating from the 1970s, sustained by neoliberal finance-led growth and which has exhausted its capacity to foster growth and profitability. Again, capitalism has had to face up to problems of over-accumulation and over-capacity, which are intrinsic to its reproduction dynamics.⁴ What Marx showed was not only the contradictions of capitalism over time, but also that these contradictions arise from its own inner logic (Harvey, 2010, 2014). Thus, capitalist development breeds recurrent crises, in the sense that capitalism’s instability is systemic (Wolf, 2010). After the global crisis of the 1870s and of the 1930s, the current crisis represents a crisis of the capitalist mode of accumulation rather than a crisis in the capitalist system, as pointed out by different authors (Florida, 2010; Jessop, 2012; Krugman, 2008; Martins, 2011). While 1929 was the explosion of a structural crisis of the earlier liberal form of capitalism, 2007 represents the explosion of a crisis of the accumulation model of the modern neoliberal form of capitalism that dates back to the late 1970s/early 1980s (Kotz, 2009).

When analyzing the present depression as the expression of the end of the accumulation model of the last 40 years, it could therefore be considered as an economic downfall; that is, that capitalism can only solve its crisis by a crisis. As Brenner (2012) points out, ‘to actually resolve the problem of profitability that has so long plagued the system—slowing capital accumulation and calling forth ever greater levels of borrowing to sustain stability—the system requires the crisis that has, for so long, been postponed’.

Moreover, capitalist development, linked to recurrent investment to foster progress and hence increasing profitability rates, has progressively colonized other dimensions of social life overreaching its own limits beyond the economic realm. The most visible reversals are exemplified by ecological unsustainability, human deprivation, socio-political unrest or even personal disaffection in spite of increasing income. When defining a systemic crisis we refer to one that affects the whole social system,⁵ rooted in the capitalist relations of production, distribution and consumption that show their own limits.⁶ In broader terms, we can talk about a systemic crisis beyond the economic crisis and related not only to the aforementioned structural crisis in the capitalist system as an accumulation regime, but also to the phenomenon associated with the surpassing of the limits of sustainable self-regulation, and self-actualization of basic human needs. In fact, as we will see later, the manifestations of such a systemic crisis, as is the current one, are multidimensional, and its global and universal character has never been so clear. In this line, recent analyses from a socio-economic or political perspective have begun to analyze the existence of overlapping crises today (Addison et al., 2010; Gallagher and Ghosh, 2010; Harcourt, 2009; Jessop, 2012; Tabb, 2008).⁷

We focus on the two contradictions that the capitalist mode of production has historically faced, in order to explain different dimensions of the current systemic crisis. Taking as a point of departure, the Marxian category of the double character of production of use-value and exchange-value, we find this double contradiction engrained in the social as well as in the natural conditions of the accumulation process. As capitalist development unfolds, it generates both contradictions born from capital–labour relations on the one hand, and from society–nature relations on the other—one manifested in deprivation, the other in unsustainability.

The first contradiction refers to the logic of exchange-value, linked to accumulation processes, which dominates use-value as the production of those products that society needs for its own reproduction. Hence, worldwide we observe features of dualism, disarticulation and poverty, as direct expressions of the limits of capitalism to globally satisfy human needs and socio-economic welfare. Thus, different approaches to unequal development may better link systemic dynamics to underdevelopment, which manifests the structural constraints of this model of accumulation to foster equal economic opportunities.⁸ The second contradiction is reflected in ecological degradation. By continuously increasing needs, the system requires a constant economic growth; otherwise it collapses (Jackson, 2009). This contradiction is directly related to the double character of the accumulation process and specifically to the social mechanisms of alienation of workers from the conditions of production (Burkett, 2006; Foster 2000). Capitalist development has distorted the bonds between men (and women) and nature, which reflects Marx’s core notion of commodity fetishism in the sense that it is the production process that dominates men, and not the other way round (Sweezy, 1942). Ecological degradation is thus associated with the race for progress and endless growth, intrinsic to capitalism and exemplified by impacts in the wake of the production process but also in the depletion of resources. It is in this ecological dimension where capitalization processes embracing extra-economic realms become most apparent. Harvey (2014) considers Seventeen Contradictions of capitalism, where endless growth driven by compound rates arises as one of the most ‘dangerous’.

Both contradictions are well reflected in the impact that capitalist development has on ‘non-material’ dimensions of human life, that is, those areas that are beyond economic welfare achievement—understood as the availability of goods and services. Consequently, there is a progressive loss of those ‘spaces’, which are considered vital for individuals—domestic, communitarian and environmental—pushed by the need to deliver them via the market.⁹ The question that arises here is to what extent this trend of marketization of the vital domains for human beings has diminished their effective well-being in terms of personal satisfaction.¹⁰ An apparent paradox appears in the sense that ‘growth can be social decline by another name’ (Cobb et al., 1995), because satisfaction of some non-material needs, once basic means are satisfied, are mostly not related to the production sphere (other non-material needs, as knowledge, are of course essential for production).

As mentioned earlier, if a systemic crisis is considered as one that affects the whole social system, in turn rooted in both—social and natural—capitalist contradictions, it is possible to identify the existence of overlapping crises as ‘dimensions’ of one systemic crisis. Our aim is to transfer these ‘contradictions’ (analytical approach) into ‘dimensions’ (empirical approach) in order to make our analysis operative, through the review of recent data.

III Identifying dimensions of the systemic crisis

The major challenges the world faces today cannot be analyzed, nor treated, separately. They are, as we expect to show, dimensions of a single systemic crisis associated with the exhaustion of the current global model of accumulation. The present economic and financial crisis that started in 2007/2008 has had far-reaching global consequences, affecting low, medium and high-income countries, and possibly more people than any crisis before. At the same time, as explained previously, the economic crisis is just one dimension of the wider systemic crisis.

We focus on a series of recent interconnected dynamics that create at least four different dimensions of the present systemic crisis: an economic and financial crisis, a human crisis of underdevelopment, an ecological crisis and a socio-political and institutional crisis. In order to show these interconnected dynamics, we focus on selected indicators that we believe reflect the multidimensional nature of the crisis while keeping the analysis as simple as possible (not to say that other indicators could also be relevant). We rely on indicators not only at the global level but also at the national level (when more suitable or when global data is not available) to reflect these dynamics, which we consider have a considerable global reach.

1 Economic and financial crisis

Several authors have analyzed the economic crisis as a systemic crisis of capitalism. Although there are some conflicting points among them from a theoretical point of view, all of them converge in the conceptualization of the exhaustion of the accumulation model, operational for the last 40 years of global capitalist growth (Arrighi, 2005; Brenner, 1998; Caputo et al., 2001; Chandrasekhar, 2012; Duménil and Lévy, 2011; Foster and Magdoff, 2009; Mazzucato and Perez, 2014; Pikkety, 2014). We can therefore point to three basic features that have characterized this pattern of recent expansion: (i) declining rate of growth in the world economy (mainly OECD countries, but also many developing ones) since the 1970s, with recurrent crises reflecting the cyclical nature of capitalist development;¹¹ (ii) increasing distributive conflict (between and within countries), which generates an insufficient demand to absorb over-production and the subsequent need for public and domestic indebtedness and (iii) neoliberalism as the predominant ‘strategy’ intended to recover capital profitability through financial expansion, sustained by an artificial and unstable base and supported by governmental policies.¹² Deep within these basic features of global financial-led growth, and in the exhaustion of the present model of accumulation, the root cause of the current economic and financial crisis can be found. According to Pikkety (2014), decreasing rates of economic growth, lower than the return to capital, have led to the capital–income ratio to increase since the 1970s—as it happened during the eighteenth and nineteenth centuries until First World War—which eventually becomes economically and socially destabilizing.

Some common features between the Great Depression and the Great Recession can be mentioned from the point of view of causal factors. First of all, both crises are directly related to the ‘financial instability hypothesis’ in Minsky (1992) terms, which would include uncertainty, bubbles and lending boom just before the downturn.¹³ Second, as noted by Pikkety, increasing inequality, feeding the growing indebtedness and as the major driver behind both crises, is visible in both pre-crisis periods.¹⁴ Finally, also common to both crises is the paradoxical unconditional trust in market robustness and efficient markets by the world’s monetary authorities just before the ‘Great Recession’s turmoil started’. Some differential factors between both crises can also be highlighted. Most probably, the main difference lies in the context in which each crisis evolved. Particular to the current downturn are the neoliberal policies guiding financial deregulation (Bresser-Pereira, 2010) and a globalized context evident since the mid-1970s, which brought a greater interdependence among economies as well as its spreading effects in case of any external shock. Regarding consequences of both major crisis, we can highlight a deflationary pressure in asset prices, massive unemployment, decreasing international trade and widespread bankruptcies and defaults, all accompanied by restricted credit liquidity and the associated negative impact on productive activity.

Returning to the current 2007/2008 recession, excessive borrowing was first seen as the source of the financial crisis (Taylor, 2009); easy credit and cheap money fuelled asset and financial bubbles, which became unsustainable and imploded in 2008, dragging the financial and, later, the real estate sector into a crisis of global magnitude given the high level of worldwide financial interdependence.¹⁵ But excessive borrowing has been seen as a consequence of a global excess of capacity and resources for investment that, in the hunt for higher profits, were channelled towards the private sector in the form of credits for consumption and housing in the developed economies under a framework of high financialization and imbalances (Tridico, 2012); a ‘saving glut’ that has been pinpointed by many authors as the origin of the crisis (Lim Mah-Hui and Hoe Ee, 2011; Obstfeld and Rogoff, 2009; Posner, 2009; Skidelsky, 2009).¹⁶ Moreover, financial deregulation and the recurrent search for higher short-term profits also explain the indebtedness boom. In this case, speculative investments are clearly de-linked from real production by not adding productive surplus to the economy but only generating high financial benefits (Martínez-Peinado, 2010; Tabb, 2008).¹⁷ Finally, the search for increased productivity and profits has been associated with a lower participation of wages and salaries in national income accounts and the commensurate lower relative need for labour, implying lower employment levels and stagnated salaries.¹⁸ Increasing supply combined with stagnated salaries for middle-income groups has resulted in a lack of effective demand (actual demand determined by purchasing capacity), which helps us to understand the excess of resources for investment and the need to increase borrowing to compensate for that lack of demand. Guided by this last approach, increasing inequalities, which weaken demand relative to supply, have recently been seen as the main origin of the crisis (Brescia, 2010; Martins, 2011; Peet, 2011; Rajan, 2010; Saith, 2011; Stiglitz, 2009; Tridico, 2012) and the systemic nature of the crisis is acknowledged (Kotz, 2009).

Thus, as a manifestation of a model of accumulation that gets exhausted, we can analyze the current economic and financial crisis by tracing back the signs of such a decreasing trend. As Figure 1.A shows, since the 1970s, GDP per capita tends to reflect lower average growth rates and higher volatility. In spite of economic booms in some periods, our current system has clearly been losing pace and is becoming more unstable and cyclical in the last 40 years. In fact, this feature is related to the economy’s continuous need to increase capital investment (linked to fierce competition and full globalization), which has caused decreasing capacities of utilization rates in manufacturing in developed countries (as in the case of USA). Notwithstanding, we can observe a clearly different path of economic performance between developed and developing countries (Figure 1.B). As expected, the higher dynamism of emerging countries—mainly China—and their increasing productivity pace of development contrasts with lower productivity gains in OECD countries-mainly the US. These differentiated productivity performances between developing and developed countries are clearly visible in the great external imbalances of leading countries.¹⁹

Figure 1.A

Source: Authors using UNCTAD (2015) data.

Figure 1.B

Source: Authors using UNCTAD (2015) data.

Productivity, decreasing wages and excessive indebtedness

There is a problem with the distribution of productivity gains, manifested in an increasing gap between labour productivity and wages in manufacturing.²⁰ Figure 2 shows two clear examples: the cases of the USA and Japan. In the case of the USA, it is in the early 1980s when the divergence between salaries and productivity begins, despite both continuing to grow. In the case of the Japanese economy, while the divergence starts later, it is mostly associated with stagnant salaries. The liquidity trap that Japan has been experiencing for a long time could be a national example of a lack of effective demand, as is the case in the global economy today. In any case, both examples reflect the capacity of the system to improve capital efficiency but with the side effect of crowding people out in terms of contained salaries and reduced net employment generation (highly associated with technological change).

Figure 2

Source: Authors using ILO (2012a) data.

Figure 3

Source: IMF, Historical Public Debt Database

Given the insufficient demand, the economic growth of the last few decades has been sustained by growing indebtedness—both private and public—as an anti-cyclical mechanism. Although increasing public debt has been a common post-war phenomenon since that period, it is since the 1980s that the process of growing indebtedness has become more acute, as Figure 3 shows. At the same time, the decreasing shares of wages over GDP are also visible in the falling household rates of savings in developed countries (Figure 4). Decreasing GDP growth rates for the world economy are mostly driven by developed economies, which still account for two-thirds of the global GDP. But emerging economies with major shares on product and trade have also implied a structural change in the global system.²¹ In fact, fast growing developing countries (the so-called BRICS) have fuelled their growth rates by increasing involvement in the global economy; mainly through increasing merchandise exports and foreign investment flows (IMF, 2012b; OECD, 2010; UNCTAD, 2011; World Bank, 2011). On the other hand, these emerging economies have not yet followed a similar path of growth for domestic consumption, with most developing more as global producers rather than consumers.²² Moreover, across the developing world the disrupted capitalist development that features in these societies is demonstrated by the spread of dualism in most of them;²³ and, it can also be seen in the still meagre rate of salaried workers.²⁴ Thus, whatever the global realm, dualism in developing countries, just as with decreasing labour rents in developed countries, has led to a structural problem of increasing inequalities in the world economy.

Figure 4

Source: OECD Economic Outlook, Volume 2011 Issue 2 - No. 90

Increasing inequalities

Indeed, as previously suggested, increasing inequalities might be a major driver of the current interlinked, economic and financial crisis. Increasing inequalities may be associated with growth at early stages of development as long as income distribution does not deteriorate too much, since they allow for the concentration of resources necessary for economic development (Castells-Quintana and Royuela, 2014). However, increasing inequalities can also perpetuate themselves as a consequence of the very dynamics of the current economic system. In fact, during the last two centuries income distribution between nations and between populations within those nations deteriorated conclusively until 1980 (Bourguignon and Morisson, 2002). From 1980 to 2000, this trend was compensated basically by the significant catching-up of large and poor countries like China and India. But the key issue is the greater importance of inequality within nations in recent decades, and this has happened as much in developed countries as in developing countries (Figure 5). Indeed, as Figure 6 shows, combining inequality between and within nations, it is estimated that global inequality continued to grow after 1980, being the estimated Gini coefficient close to 0.7 in 2008 (Milanovic, 2012).²⁵ As Rodgers (2011) highlights, inequality remains the most important concern of our time, and should be an issue of urgent worry (Wade, 2011). Furthermore, a critical characteristic of today’s inequalities is the disproportionate share of income and wealth flowing to the richest few. In several countries (like the US), the income share of the top 0.1 per cent—including capital gains—reached its highest level in 2007, even topping the 1929 levels (World Top Incomes Database).

Figure 5

Source: Figure 5 shows average from a sample of 51 countries based on Gruen and Klasen (2008) data.

Figure 6

Source: Figure 6 is based on Milanovic (2012). Global inequality represents inequality among world citizens.

The increasing relevance of inequality within countries is taking us back to a Marxist world of class struggles in which capitalism becomes unstable. ‘Social inequality produces instability, recession and depression… inequality is not only unethical but also it is economically disastrous’ (Peet, 2011). In effect, current increasing inequalities represent a perpetuating factor of the crisis; on the one hand, they can be associated with higher unemployment and lower long-run economic growth (Castells-Quintana and Royuela, 2012), and on the other hand, the fact that income and wealth tend to concentrate disproportionately in few hands implies severe accumulation of power and political constraints to change (Kumhof and Ranciere, 2010). Finally, inequalities also represent a major transmission mechanism that links the economic crisis to the other dimensions of the systemic crisis in a self-reinforcing process.²⁶ In particular, as we will demonstrate, increasing inequalities are associated with, and also help us to understand, the human development, environmental and socio-political dimensions of the systemic crisis.

2 Human and development crisis

Our economic system, and in particular its unequal distribution structures of wealth and income, an uncontrolled demographic explosion and the degradation of the environment associated with it, place us ‘squarely’ in a human crisis of global proportions. This is a crisis characterized mainly by a growing number of people living in extreme poverty; a planet where the majority still lives in the direst situations of under-development. Billions of people lack access to basic human needs such as potable water, sanitation, housing and education, and in too many cases they face deterioration in their quality of life, rather than an improvement.

Hunger

The year 2015 was the target date for the Millennium Development Goals (MDG). The first major goal was to eradicate extreme poverty and hunger. Success has been limited, with large geographical differences (see MDG Monitor). In 2005, it was estimated that 1.4 billion people still lived on less than US$1.25 a day, which is considered as the international extreme poverty income threshold and being unable to satisfy minimum dietary requirements.

Figure 7 shows the evolution of total population, under-nourished population and food production (all worldwide estimates). As can be seen, food production until the 1990s was associated with a significant decrease in total under-nourished population around the globe. Since the 1990s, food production has soared— exceeding total population growth—but the total number of those under-nourished is no longer decreasing: with an unacceptable 925 million people suffering from chronic hunger in 2010, 100 million more than in 1990 (FAO estimates). Further exacerbating this problem, food prices have increased sharply since the early 2000s.²⁷ In particular, they soared between 2007 and 2008—when the economic crisis erupted—and have done so again since 2010.²⁸ Rising food prices and the current global ‘Great Recession’ drove an estimated extra 64 million into extreme poverty and hunger just in 2010 alone (see Global Monitoring Report, -World Bank, 2010). It is estimated that about 10 million people die of hunger and hunger-related diseases yearly (MDG Monitor). In conclusion, the increasing inequalities associated with our economic system, reinforced by higher food prices in the midst of the crisis, support our incapacity to decrease hunger worldwide in a sustained way, despite higher food production, as well as our incapacity to cover basic human needs for all.

Figure 7

Source: Authors using WB and FAOSTAT data.

3 Ecological crisis

In parallel to the economic and human crises, we also face a critical global environmental crisis. It is by now well recognized that human activity is driving the Earth system outside its stable environmental state, with potentially catastrophic consequences. As with the other crises, the ecological crisis is interconnected in reinforcing ways with the other systemic imbalances, and also intrinsic to capitalist development based on capital accumulation. The crisis is the result of more than a century of industrial development worldwide, which relies on carbon-based energy sources, situating our world in a new era, the Anthropocene, in which human activities have been the main driver of global environmental change (Rockström et al., 2009). It is intrinsic to capitalism as it can be situated in a network of social, political and economic structures, creating a deep rift in the metabolic relation between human beings and natures’ metabolism that is the basis of life itself (Foster, 1999; Foster et al., 2010; Howard, 2012). This rift includes a disruption of natural processes and cycles as well as the accumulation of waste and environmental degradation. Thus, according to Clark and York (2005), the systemic degradation of the biosphere reflects how capitalism consumes everything in order to survive, even the natural resources that sustain the system itself.

Rapid accumulation of wealth has been possible thanks to massive and unequal appropriation and extraction of natural resources, setting the bases for global environmental wreckage and global inequalities (Simms, 2009). As a consequence, we face a challenging trade-off between sustainability and economic growth; the system is characterized by unsustainable exponential economic growth (Martenson, 2011) and by overproduction in the midst of unmet social needs—with the struggle of billions of people to benefit from economic development adding pressure to the resource base of the planet (Tabb, 2008).

Indeed, our ecological crisis has become especially critical today. We experience a ‘triple crisis’ of finance, energy and the environment. However, paths to recovery have neglected or marginalized ecological issues (Jessop, 2012)—with environmental concerns been generally outside most economic analysis, until recently.²⁹ Worryingly enough, the long-run trend of global warming has dramatically accelerated in recent years, despite technological advancements and despite stagnated production due to the current economic crisis. On the one hand, structural conditions under the current economic system limit the ecological benefits of technological development; the Jevons’ paradox predicting that greater efficiency in resource use often leads to increased consumption of resources. We were indeed substantially more efficient at producing sustainable well-being in 1969 than in 2005.³⁰ On the other hand, transformations associated with the economic crisis have actually accelerated the process; carbon emissions in 2010 showed the biggest jump ever recorded.³¹ Firstly, the main drivers of world economic growth are now countries like China, which are much less energy efficient than developed countries and rely more heavily on fossil fuels (and as noted above, any increase in their energy efficiency will most likely translate into more intensive use of fossil fuels, dramatically increasing total CO₂ emissions). Secondly, and at least in the short run, the economic crisis may be restricting some unintended mechanisms through which we were counteracting global warming.³² Finally, the economic crisis and its social consequences, have driven away the increasing concern and political will that was mounting in favour of environmental conservation (Lovelock, 2006).

Rockström et al. (2009) identified up to nine planetary boundaries that define the safe operating space for humanity.³³ Similar to the different dimensions of the systemic crisis analyzed in this work, the different planetary boundaries are not independent but interact with each other. In particular, there are currently three planetary boundaries, which have already been transgressed: (i) accelerated global warming (associated with the acidification of the oceans, the rise of coastal levels and alterations in the Earth’s magnetic field); (ii) the dramatic pace of biodiversity and natural ecosystems loss; and (iii) the interference with the Earth’s nitrogen and phosphorus cycles.³⁴

Ecological footprint

One simple and synthesized way to evaluate our environmental impact, and our situation of ecological crisis, is by looking at our ecological footprint. Figure 8 shows how in recent decades our ecological footprint has constantly been exceeding our planet’s capacity for recovery; an increasing ‘ecological debt’ that we are accumulating with the planet. And ecological debt also has at least three different perspectives associated with global inequalities: (i) an inter-generational one, as most of current environmental burden is due to past unequal economic development; (ii) an intra-generational one of still unequal use—and abuse—of natural resources, where those causing lower environmental deterioration are at the same time those who suffer the most from it (see, for instance, Martinez-Alier, 1997; Sutcliffe, 1997); and (iii) a trade-related one, as exports from the global south to the global north have a higher value in terms of natural capital not captured in the market price than exports from the north to the south.

In sum, our impact on the planet is greater and greater and in many aspects both difficult to reverse and highly worrying; there are more of us and we consume more. As we face economic and financial collapse (see Section 1), as well as human deprivation (see Section 2), we also face ‘environmental bankruptcy’—using Simms’s (2009) expression.

Figure 8

Source: Global Footprint Network (2010).

4 Socio-political crisis

All the imbalances reviewed earlier (increasing inequality, hunger, poverty and environmental degradation) can be related to a crisis of governability, at national and international level, where institutions surely play a dramatic role. The current neo-liberal globalization represents a process of ‘detraditionalization’ (Giddens, 2003), where we feel in the grip of forces over which we have no control, question traditional ways of acting and lose self-identity, leading to political apathy, increased addictions and even the rise of fundamentalism. That being said, we focus here on the evolution of socio-political conflict and political disaffection within countries. It follows that, the abovementioned imbalances have accentuated not only the human crisis but have also fuelled a growing number of conflicts producing more and more violent deaths and the abuse of fundamental human rights, that in turn feedback and create economic distortions. Indeed, several authors have provided convincing evidence on the causative links between inequality, social-political instability and economic growth (Alesina and Perotti, 1996; Keefer and Knack, 2002; Svensson, 1998). In Africa, violent revolutions, coups and wars follow on one from another, as the continent stagnates in poverty. The Middle East is still in endless conflict. Latin America, the most unequal region of the world, suffers because of delinquency, drug trafficking and guerrillas. In Asia, governmental oppression and political polarization take the lives of millions. Worldwide we have a growing number of countries becoming failed states, without a functioning government or legal order. As Figure 9 shows, there has been an upward trend in armed conflict since the 1940s (Cold War) but it is during the 1970s when the increase becomes dramatic (precisely as inequalities soar), only slowing down at the end of the nineties. In fact, a higher incidence of violent conflict is clearly demonstrated not only by the increasing number of refugees worldwide since the late 1970s, but also by the type of refugees: who are now characterized more by ‘internal displacements’ due to intra-state conflicts than by international ones.³⁵

Besides armed conflict, it is also worth mentioning an increase in urban riots and social disturbances. Although not classified as armed conflict, they can, in many cases, be considered as another worrying violent expression of growing social unrest;³⁶ a social unrest rooted in a deeper crisis of governability, both nationally and globally, against the exploitation by the governing elites, corrupt and insensitive to people’s difficulties.³⁷ Even in the so-called advanced democracies, as wealth dramatically concentrates in the hands of some few, there is a clear distance between the people and their political representatives as reflected in lower turnout indices (Figure 10). Both facts reflect the paradox of (liberal) democracy, that is, increasing social unrest and increasing disaffection of voters, occurring in a world where the percentage of countries who have democratic government has gone up from 31 per cent in 1960 to 58 per cent in 2008 (HSRP, 2010).

Figure 9

Source: HSRP (2010).

Figure 10

Source: Authors using International IDEA (2012) data.

IV Systemic crisis and the impossibility of sustainable human development

1 Independent crises or interconnected dimensions?

The different dimensions of our current systemic crisis, highly interconnected as we have seen, have begun to show an unbalanced and harmful dynamic in the last quarter of the twentieth century. The supply-driven economic growth of recent decades has led to a lack of effective demand as a result of the search for increasing profits and, therefore, a decrease in the working wage. Along with increasing disparities in wages, this has led to extreme and increasing inequalities and higher social exclusion (characterized by overconsumption by some and deprivation for many), which has also led to increased social tension and political conflict—in many cases turning violent. At the same time, overproduction, unequal access and exhaustion of our natural capital, are leading to dramatic environmental degradation. Finally, as a consequence of all of these, we also face a crisis of values, beliefs and personal satisfaction (affecting both advanced economies and the developing world), which has become evident over the last decades. Figure 11 analytically synthesizes these interconnected imbalances, discussed throughout this paper as empirical dimensions of a single systemic crisis.

The existence of overlapping crises today is neither mere coincidence, nor independent disruptions. Our theoretical and empirical analysis suggests that they are highly interconnected imbalances, reinforcing each other, rooted in the onset of modern capitalism and becoming unsustainable in its current global- financial-led phase. The two aforementioned contradictions of capitalist development are primarily articulated today in terms of decreasing well-being, unequal global development and environmental collapse. If we consider the accumulation process in both its ‘social’ and ‘natural’ character, it would be the inner logic on capitalist development, which gives us the interconnection between the dynamics of the economic/financial crisis and the increasing inequality, social exclusion, ecological depletion, conflict and social discontent.

The imbalances analyzed represent the current economic, human, ecological and socio-political limits of capitalism and clear signs of the unsustainability of the system. Unsustainability in terms of the incapacity of the system to cover human needs of the whole population as well as in its inability to limit itself in terms of use (and abuse) of natural resources.

Figure 11

Dimensions of the systemic crisis

2 Development beyond material well-being

The existence of overlapping and interconnected crises—which as discussed above are related to the nature of the capitalist mode to organize production processes—demonstrably proves that a life based on increasing consumption in an environment of social, cultural and natural degradation may all-too-easily be translated into major personal dissatisfaction. This ‘non-material’ dissatisfaction could be the penultimate expression of the systemic crisis in the sense that capitalism’s race to accumulate—all-too-firmly embedded in modern societies, which confuse ‘having’ with ‘being’—is progressively invading most of our ‘sacred spaces’ of social and personal life relating to nature, the community and even oneself.

In recent decades, the development of alternative indicators reflects the shortcomings of GDP to express qualitative dimensions of well-being, and has highlighted the divergent trend between output performance and people’s satisfaction. Some adjustments of GDP so it better reflects well-being include, among others, the correction for unequal distribution of income, the incorporation of non-market economy benefits associated (for instance) with housework, parenting or social tasks, and detracting costs associated with ecological degradation (see, for instance, Talberth et al., 2007 or Stiglitz et al., 2009). All of these adjustments try to emphasize the need to consider both objective and subjective dimensions of well-being. The decreasing capacity of GDP to enhance life satisfaction has already been shown by several authors focusing on ‘happiness economics’ (from Easterlin, 1974 to Stutzer and Frey, 2010, among others). The first UN World Happiness Report (Helliwell et al., 2012) studies determinants of happiness in societies around the globe. The Report highlights that it is not just wealth that makes people happy.³⁸

It is therefore interesting to analyze how material well-being translates into psychological experiences of fulfilment (Alkire, 2010). In Figure 12, we try to capture this dissociation between the measurement of socio-economic well-being and people perception of it, by comparing (for 140 countries) per capita GDP with a subjective measure of well-being— Life Satisfaction Index (Abdallah et al., 2009)). The figure illustrates two main points: first that higher per capita GDP correlates with higher life satisfaction but in a decreasing way.³⁹ This pattern suggests that increasing incomes no necessarily contribute to improving well-being in all cases—in line with human development approaches. Second, that there is high variability in the levels of life satisfaction for countries with similar levels of per capita GDP, especially in poorer countries. This variability decreases as income increases, suggesting a process of satisfaction homogenization linked to income while devaluing other dimensions of personal wellbeing.

Ultimately, it seems clear that capitalist development not only doesn’t allow people to fully realize their capabilities, in the sense of Sen’s (1983) human development advocacy. In addition, an incomprehensible by-product of capitalism concurrently displaces human needs from the socio-economic agenda.⁴⁰ Therefore, it seems eminently plausible to us that increasing growth and higher per capita income not only means that no personal satisfaction occurs or not enough is forthcoming. Furthermore, it remains a distinct possibility that many people today might disguise things like social decay, the borrowing of future resources, or the shifting of functions from the traditional realm of household and community to the realm of the monetized economy.⁴¹

Figure 12

Source: Authors using New Economic Foundation (2009) data.

V Final considerations

In this article, we have argued that the current capitalist crisis is a systemic one, rooted in the dynamics of capital accumulation. We have supported our argument on theoretical grounds as well as on the analysis of recent data for a broad range of indicators. As we have shown, the social and natural contradictions of the system manifest themselves today in terms of unequal development, ecological degradation and social unrest. Nevertheless, the systemic character of the actual crisis refers not only to different converging crises but also to the global framework where these crises are occurring. Never before have the connections between countries and classes around the world reached the level of interdependence we have shown that is occurring. While the current crisis can be considered as another cyclical crisis of capitalism in the sense that it has been fuelled by neoliberal globalization, it is noticeable that neoliberalism has just been the ideological ‘faith’ that global capitalism relies on to fulfil its process of capital accumulation, and perpetuate its dominance over so many interwoven spheres.

Regarding the methodological approximation to the analysis of current global phenomena, and following an integral approach for the study of the systemic crisis, the still-existing constraints of economic analysis to fully understand a multidimensional crisis (and its inability to confront its consequent irreversible impacts) has clearly emerged. Along this line, two shortcomings can be highlighted. First, there is a ‘perversity measurement’, which relates to the recurrent economic trap, which gives value only to what can be measured while not taking into account the incommensurability of human well-being or the irretrievable loss of the natural environment. Second, a ‘conservative nationalism’, which is reflected in the increasing dissonance between global challenges and national mindsets, is making it difficult to deal with a systemic crisis by the application of current tools, policies and political wills designed to function at national levels. The crisis, as an expression of the shortcomings and contradictions of the current system, gives us the opportunity to face up to all these challenges as they represent a critical situation of fracture and discontinuity.

In terms of policy implication, our analysis shows that responses to the present recession are not taking into account its systemic and multidimensional character. Bailouts and other recovery receipts, as austerity measures, are aimed at overcoming the crisis by trying to restore previous growth rates, which only deepens capitalist dynamics that are precisely the root of the crisis. As Brenner et al. (2012) have recently highlighted, this strategy represents a return to a new form of neoliberalism as a contra-offensive strategy. In fact, recovery strategies based mainly on austerity measures lead to a vicious circle, which by reconstructing the capitalist base for accumulation also increases workers’ impoverishment and reduces social well-being. These strategies represent capitalism’s own logic to solve recurrent crisis. If we indeed face a multidimensional systemic crisis, any recovery policy as well as any alternative of change, should take a broader and more integrated perspective considering the economic as well as the human, environmental and socio-political dynamics and the interconnections between these dynamics. Hence, acknowledging the systemic and multidimensional character of the crisis, we emphasize the need for integral responses at both national and international levels, with global coordination and cooperation required (but also with a local focus as most problems today are more clearly manifested at the local level).

From a structural perspective some economic interventions appear as fundamental: a correction of current global imbalances in savings and consumption and a strengthened regulation of global finances in order to re-link liquidity to productive investment. But addressing only the economic crisis, without paying attention to other global imbalances, will continue to prove unsuccessful in the long run. To begin with, any policy design should not exacerbate the inequalities and dramatic social consequences of the crisis. Reducing inequalities appears not just as a fundamental goal in itself and key instrument to address the current economic crisis, but also to address all the different imbalances inherent to the system and analyzed in this paper, including the human, ecological and socio-political. Intra-generational redistribution is essential to simultaneously address poverty and environmental deterioration and therefore also represents inter-generational redistribution from this generation to future generations. Likewise, redistribution is also crucial to address social tension and political conflict. Indeed, the viability of any alternative successful strategy relies on a redistribution of wealth and the power associated with it.

More broadly, the design of alternative paths to the present situation should acknowledge the current inability of the capitalist economic system to ensure its main function of social reproduction. We have argued that the current systemic crisis is rooted in the inner dynamics of capital accumulation, which in turn have generated in a parallel way different reinforcing disruptions. Thus, the first question is therefore a technical one in the sense of how to face up to, and effectively counter the (contradictory) logic of accumulation that leads to the problem of surplus absorption. That is, not only do we need to appropriate and distribute the surplus workers produce in a collective and democratic way, but also we need to find out how to socialize this surplus can be realized in a productive and profitable way. This leads us to reconsider the human question, that is, to wonder which kind of society we aim for, including a change in values and beliefs in order to build a sustainable human development. It also leads us to think about how to address the political engineering capable of articulating social change. In this way, further research and discussion are clearly needed.

Footnotes

Notes

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